Last week, there was the news that the average basic monthly salary for employees in their main occupation is €1,848, or €22,176 annually. To this one may need to add overtime, bonuses, allowances and benefits, where they apply.
We all know that averages hide a number of factors, but they are still very useful and indicative. One of the things that average income hides is actually income inequality. Therefore, this triggered further research on my part and a number of considerations started to emerge.
One of the first points to consider is the gender pay gap. The average basic monthly salary of men is €1,924, while that of women is €1,756. This may be a consequence of a number of factors, such as job responsibilities and career progression. They are worth investigating separately. In none of the economic sectors do we get anywhere close to equality between the genders.
The sector where there is the widest gap is what is termed as “other services”, which includes the internet gaming sector. The gap is narrowest in the public administration, health defence, education and social services sector. This is a sector that is highly characterised by public sector employment.
The economic sector that has the highest average basic monthly salary is the financial and insurance activities sector, followed by the information and technology sector.
The economic sectors that have the lowest average salary are the construction sector and the distribution, transport, accommodation and food service activities sector. These are the two sectors that are highly characterised by non-Maltese workers, and more so non-EU workers.
These considerations already start to provide pointers to income inequality aspects.
60% of the population earn less than €20,485, which is lower than the average basic salary
A second news item was that the average first-time buyer spends up to €250,000. This data hits you straight in between the eyes. It takes young people around 10 years’ salary to purchase their first home.
I could not find statistics going back several years. However, personal anecdotal evidence suggests that 35 years ago, it took young people six to seven years’ salary to buy their first home. This is also an indication of income inequality.
Information is also available about the average basic monthly salary by occupation group.
The highest paid group is the managers group. The lowest paid group is the elementary occupations group. On average, managers earn 2.4 times more than the elementary occupations group. The managers group is the only one where the average salary of women is higher than that of men. In the clerical support workers group and in the plant and machine operators group, the gender pay gap is much smaller.
The next bit of data researched was from Eurostat, the EU statistics office. They had information relating to the distribution of income by quintiles. This divides the population in five relatively equal parts and gives the top cut-off income of each segment.
The top 20 per cent of the population earns more than €28,820, while the lowest 20 per cent earns less than €11,720. Sixty per cent of the population earn less than €20,485, which is lower than the average basic salary. This is also an indication of income inequality.
The last bit of data is estimated by the World Bank and is called the Gini Coefficient. This is a measure of how equal a country’s distribution of income is. The closer it is to zero, the more equality in income there is.
The most recent data found was of 2020, and Malta’s Gini Coefficient index is 31.2. It was 28 in 2006, implying that income inequality has increased between 2006 and 2020.
There are those who believe that income inequality has its own merits. If there were no differences in income that reflect the complexity of a job, the experience and knowledge required, the availability of skills and so on, then people would have no incentive to move towards more responsible jobs or to produce more. There needs to be a monetary reward to support career progression and better results. I believe there is a great deal of merit in such a point of view.
On the other hand, economic growth cannot be sustained if there is no social cohesion. Severe income inequalities reduce social cohesion and renders economic growth unsustainable.